An Australia & New Zealand excavation firm had secured a significant new contract in New Zealand. They had successfully negotiated with their bank to secure a $5 million asset finance arrangement secured against the new contracts.
Based on approvals, they set about enlarging their fleet and equipment in anticipation of revenues from these new contracts. There are significant lead times in ordering the equipment, training staff and ensuring compliance. The company was spending ahead of revenue.
Before the firm could draw down the funds, their banks’ management changed financing policies. The funding was being withdrawn, creating a significant shortfall that needed to be addressed.
Their finance team engaged an Australian finance broker to consider providing finance to the New Zealand subsidiary of a substantial Australian parent company. A complex working capital problem - cash flow.
The broker set about arranging financing for both the Australian parent company, and the New Zealand subsidiary company. The broker understood that a cash flow facility was required. With the right working capital solution, they would be able to use invoice financing to repay their existing bank working capital facilities, without increasing director personal liabilities.
The client had multiple shareholders, but all their assets were domiciled in Australia. This provided no real guarantor in New Zealand should anything go wrong. Further, the industry is fraught with risk making it more complex.
Lock Finance was approached based on our trans-tasman reputation and the fact that our board & shareholders find practical solutions to complex working capital problems.
Working collaboratively, we structured a bespoke invoice finance facility that met the immediate cash flow requirements, and provided working capital scale.
A $900,000 Invoice Finance facility immediately improved the company’s cash flow, and ability to pay down their banks’ lending. The benefits of the scalable solution also helped when the New Zealand economy went into lockdown due to COVID-19. In addition, Lock Finance were able to provide advice on a better accounts receivable process to improve core cash flow management within the business.
The business is now trading well with an invoice finance facility that scales as they grow. They now have the confidence that they will have the cash flow to support any new contracts they may get, without being subject to the whims of bank policy.